Lean Organizational Structure

1. Lean Organizational Structure Lean Leadership Series

2. Topics • Work Flow and Work Design • What is a Value Stream? • Organizational Structure • Lean Organizational Structure • Benefits of Lean Organizational Structure • Incentives and Reward Structure • Adapting Structure and Systems • Education and Training • Barriers to Change • Achieving an Extended Lean Enterprise • Sustaining Lean Organizational Structure • Summary

3. Organizational Structure Maintenance Marketing Production Product Design & Development Organizational Silos Procurement Quality Mgmt Finance/ Accounting These silo units impede efficient communication, coordination, responsiveness and overall system optimization

4. Organizational Structure • Traditional Organizational Structure • Is incompatible with the value stream flow • Its design support long production runs of standardized parts in batches with long flow times • It does not support one-piece flow and just-in-time (pull) production • It is structures to minimize machine and worker idle time, but at the expense of very high inventory levels, long flow times, cluttered shop floors and high scrap/obsolescence rates • It is not structured for minimizing response time and maximizing flexibility • Results in extreme specialization of job functions

5. Organizational Structure • Traditional Organizational Structure • Results in a large number of job classifications • It is incompatible with the team approach of Lean production in which workers perform many tasks and have few job classifications

6. Lean Organizational Structure • Effective structure in Integrated Product/Process Teams organized as self-managed work teams • A dedicated team for each product family includes expertise from marketing, engineering design, purchasing, tooling manufacturing, industrial engineering, quality assurance, customer relations, suppliers and customers • Work teams are focused horizontally on a linked set of activities along the value stream • Facilitate ongoing efforts to minimize waste via continuous improvement initiatives

7. Lean Organizational Structure The work teams are in a position to perform many of the “indirect tasks” associated with managing their work, including: Workspace layout Quality assurance Maintenance Setup change-overs Rebalancing work loads Continuous improvement

8. Benefits of Lean Organizational Structure • Greatly reduces non-value-adding functions • Increases efficiency • Increases flexibility • Enhances the workers’ value to the Enterprise • Improved employee engagement and satisfaction • Harnesses its employees ideas towards continuous improvement and enables it to grow profitably.

9. Education and Training • The most important element in any organizational transformation initiative is that of education and training • These are especially critical in transitioning an organization from a mass-production paradigm to a Lean-production paradigm

10. Achieving an Extended Lean Enterprise • A lean transformation is not complete until it reaches beyond the immediate company to include customers and suppliers in the overall Lean system design • Only in this way can the complete value stream be structured and optimized in accordance with Lean principles and practices

11. Summary • There is only one effective organizational structure for anyone else seeking to become Lean and that is one built around Value Streams. • The value stream is the core structure of a Lean Organization • The objective is for organization is to become world class, create a seamless process of taking a product concept to customer deliver • Remove waste that occurs in all functional interfaces of the organization

12. Summary • Identify the set of tasks to be optimized and synchronized • Performance metrics are only useful at the value stream level • Lean Organizational Structure is the only structure that can bring all of the best thinking and best efforts in the organization to bear on sustainable, bottom line improvements